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When geopolitical risks hit the supply chain: Impacts on credit default swap market

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  • Huang, Yin-Siang

Abstract

This study examines the impact of cost-weighted geopolitical risk exposure in the supply chains of U.S. firms. Using a Difference-in-Differences (DiD) framework centered on the Russo-Ukrainian War, we find that treated firms experience a significant increase in credit default swap (CDS) spreads. In addition, these firms exhibit higher default probabilities and lower credit ratings, reflecting heightened financial vulnerability. These findings underscore the need for incorporating supply chain geopolitical risk metrics into credit risk assessments by policymakers and financial analysts, especially during periods of geopolitical uncertainty.

Suggested Citation

  • Huang, Yin-Siang, 2025. "When geopolitical risks hit the supply chain: Impacts on credit default swap market," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008815
    DOI: 10.1016/j.frl.2025.107622
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    Cited by:

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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